The dollar is trading softer into the London open

13 January, 2017

European Outlook: Aftershocks from President-elect Trump’s campaign-like press conference, which had weighed on global stock markets and yields started to recede late in the U.S. session and U.S. equities managed to recover part of their losses. Asian markets rebounded led by Japan as the Yen weakened and U.S. and U.K. stock futures are also higher, while the front end Nymex future is trading around USD 53 per barrel. Bund futures already started to head south in the after hour session yesterday and core yields are likely to move higher in early trade. The European calendar only has the BoE’s credit conditions survey and the final reading for Spanish December HICP, leaving markets to focus on global developments.

FX Update: The dollar is trading softer into the London open, but remains comfortably above the post-Trump press conference lows. USD-JPY has ebbed to the upper 114s after failing to sustain gains above 115.00, but remains over a big figure up on yesterday’s one-month low at 113.75. EURUSD has firmed up to around 1.0630 after logging an intraday low in Asia at 1.0603, but still remains some 50 pips below yesterday’s one-month peak. While doubts have now crept in about U.S. president-elect Trump’s reflation plans following his fractious press conference on Wednesday, returning some support to the dollar have been Fed speakers, who were not been shy yesterday in warning of upside risks to policy in 2017, with the debate hottest over how quickly to hike rather than when to do so. Another batch of U.S. data today will help shape Fed policy expectations, though Trump may have his work cut out to reignite the sputtering Trumpflation trade.

U.S. Reports revealed surprising firmness in December export prices alongside a restrained oil-boost to import prices, and a largely expected 10k rise in initial claims to a still-firm 247k that signals a tight start for 2017. For trade prices, the relative firmness in export versus import prices trimmed Q4 GDP growth prospects, though we left our estimate at 1.6%. For claims, gyrations through the New Year’s week can be attributed to holiday volatility, though we’re encouraged that claims are starting January below the 258k December average. Next week’s BLS survey week reading will likely undershoot the 275k December BLS survey week figure. We expect a 180k January nonfarm payroll rise that matches the average monthly gain in 2016, though this average faces a likely downward bump with the next report’s annual revisions.

Fedspeak: Chair Yellen’s speech contained surprises and keynote comment was that sh e thought “short term I would say I don’t think there are serious obstacles. I see the economy as doing quite well”   Fed’s Bullard maintained a rather circumspect outlook on policy and the economy. He projects only limited movement in rates, reiterating his views noted earlier of perhaps only 1 tightening this year and noting there is little reason to alter policy as the Fed nears its goals. There shouldn’t be any undue pick up in inflation. Job growth is likely to slow this year and next. And in terms of the new administration’s policies, he said it’s questionable what will actually occur. Bullard is not a voter this year. Kaplan: Fed should be removing accommodation in 2017, with growth forecast at greater than 2%, even without any fiscal boost. The U.S. is pretty near full employment and inflation is heading to 2%, though there’s some slack in the labor market and more demand than supply for skilled workers. He expects regulatory review and tax reform to help boost productivity, along with infrastructure investment. Kaplan said he will be scrutinizing decisions on trade, immigration and Obamacare for any impact on growth, while manufacturing plants need to be allowed flexibility in supply chains. This about par for the course, with the Fed evidently predisposed to normalize rates in 2017 all else equal.

Main Macro Events Today                        

US Retail Sales – December retail sales data is out today expectations are for a 0.7% headline with the ex-autos aggregate up median 0.5% on the month. This follows November data which had the headline up 0.1% and ex-autos up 0.2%.

US  PPI Data –  December PPI data has expectations to post a 0.3% with the core index up 0.2% on the month. This compares to respective November figures which posted a 0.4% headline and a 0.4% increase for the core. Despite the fact that oil prices remain at depressed levels we did see a 14.0% climb in WTI prices in December which could lend some support to the headline.

US Michigan Consumer Sentiment – The first release on January Michigan Sentiment should reveal a headline increase to 98.5 (median 98.4) from 98.2 in December and 93.8 in November. Consumer confidence measures have been posting improvements since the election and the January IBD/TIPP poll has already reveal an increase for the month with a rise to 55.6 from 54.8 in December.


Source link  
Gold falls at Friday close to 1275

The key commodity was pivoting around $1285 with support at $1282 and resistance around 1286. The London close, put pay to that as a raft of futures...

Stock market recovery continued

Still, U.K. and U.S. futures are also moving higher, indicating that abating fears over North Korea are keeping markets underpinned, while earnings optimism...

NZDJPY beneficiary of Asian session

With a the NZD is overvalued on one side and Sabre rattling between North Korea and the US continuing overnight there was really only...


Euro above 1.18 against the dollar

Asian stock markets moved higher, with a rally in banks underpinned by earnings reports and helping to offset pressure on exporters and automakers...

Gold support at 1258 but rolled over 15m

Gold remains bullish having posted at high over 1265 yesterday. My bias remains long and I entered again at 1258 last night. However, the intraday...

FOMC held rates steady

The Fed’s reluctance to commit to a time for QT beyond “relatively soon” and the fact that the Fed appeared to be moderately more concerned...


FOMC decision to outline its balance

U.S. markets will have a lot on their plates this week as they continue to assess the June jobs data, global developments in the aftermath of the G20 meeting...

Dollar majors have been challenged

EURUSD has settled around 1.1350, modestly above the five-session low posted yesterday at 1.1336. USDJPY has been trading on either side of 113.00...

Yen crosses keep ascending

The yen is coming under pressure across-the-board, with the 0% yielding yen converting back to the funding currency of choice in the forex market...

  


Share: